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7 Reasons IBM Stock is a Buy

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But for long-term investors, there
are plenty of reasons to take
advantage of IBM’s stock slump

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1) IBM’s competitive advantage
• Roughly 80% of IBM’s revenue comes
from clients deploying hardware,
software, and services
• IBM’s ability to deliver integrated
solutions is the key to its economic
moat
• Industries like banking and retail
depend on IBM’s mainframe systems,
and switching to a competing solution
would be infeasible in most cases

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IBM clients include
• More than 90% of the top 100
banks
• 9 of the top 10 oil and gas
companies
• 80% of the global top 50
retailers
• 92 of the top 100 healthcare
organizations
• 9 of the top 10 telecom
companies
• Hundreds of state and local
governments

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3) A fast growing cloud
• IBM is investing in strategic
imperatives, areas that will drive most
of its growth going forward
• IBM generated $8.7 billion from its
cloud business over the past twelve
months, including hardware, software,
and services
• This number grew by 50% year-over-
year during IBM’s latest quarter, and
IBM is actively making strategic
acquisitions
• IBM’s cloud revenue delivered as
service has reached an annual run rate
of $4.5 billion

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One of the best big tech dividends
Company Dividend Yield
International Business Machines 3.35%
Microsoft 2.65%
Cisco Systems 2.98%
Apple 1.80%
Intel 3.32%
Qualcomm 3.05%
Dividend yields based on most recently announced dividend payment

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5) A big push into healthcare
• One of IBM’s largest opportunities is the
healthcare industry
• Watson, IBM’s machine learning system, is being
used by cancer institutes to analyze vast troves
of data and provide personalized treatment
options
• IBM’s Watson Health unit has entered
partnerships with Apple, Medtronic, Johnson &
Johnson, and CVS Health
• The $700 million acquisition of Merge Healthcare
combines Watson with Merge’s medical imaging
management platform
• IBM’s goal is for Watson to become a critical tool
for the multi-trillion dollar healthcare industry

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6) Software could raise margins
• Over the past decade, software
has grown to represent more
than a quarter of IBM’s revenue
• Software carries far higher
margins than any other part of
IBM’s business
• IBM’s strategic imperatives are
about 50% software, and as they
grow as a percentage of IBM’s
total revenue, profits can rise
even without much revenue
growth
Segment
Q2 2015
Pre-tax margin
Software 34.4%
Global
Technology
Services
15.1%
Global
Business
Services
14.7%
Hardware 11.8%

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7) The potential of OpenPOWER
• IBM’s Power servers have been losing
market share to x86-based systems for
years
• The OpenPOWER foundation was
started in 2013 in an effort to build an
ecosystem around IBM’s POWER
architecture in the data center
• There are now 147 OpenPOWER
members, and over 1,600 popular Linux
applications, like MongoDB, Apache
Spark, and Hadoop, now run on the
POWER architecture
• OpenPOWER has the potential to
challenge Intel in the data center
Major OpenPOWER Members

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